Morgan Stanley (NYSE:MS) is limiting withdrawals from its flagship private-credit vehicle after investors asked to redeem a double-digit share of the fund. The $7 billion North Haven Private Income Fund will only fulfill part of the second-quarter cash-out requests, according to a regulatory filing.
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The bank reported that redemption demand reached nearly 11.6% of units outstanding, prompting the fund to satisfy 43% of requests for the quarter, Reuters reported. The filing also said that about half of the latest redemption orders came from investors who were previously unable to fully exit.
In the first quarter, investors had sought to pull roughly 10.9% from the fund. Morgan Stanley’s investment management arm pointed to steadier request patterns versus the prior quarter in a letter to investors.
“We believe that both the composition as well as the stabilization in the level of request activity as compared to the first quarter may be indicative of durability in the Company’s investor base,” the letter said. Private-credit products sold to individual investors have been dealing with unusually heavy redemption activity, as Reuters noted.
As of May 31, the fund held loans tied to 301 borrowers spanning 45 industries, Morgan Stanley said. The filing put the fund’s software exposure at about 22.7%.
The fund said net asset value was reduced by about $102 million after factoring in subscriptions and dividend reinvestment, which it described as roughly 3.2% of its March 31 level.
“We Are Not Through The Turbulence Yet”
A smaller related vehicle, North Haven Private Income Fund A, received redemption requests equal to 7.2% of shares and planned to meet 5% under its standard limit.
Other non-traded business development companies run by Apollo Global, Blackstone and BlackRock have curtailed withdrawals.
The flagship private credit fund of Cliffwater LLC capped redemptions at 5% in the second quarter after investors sought to redeem approximately 17% of the fund’s shares.
Partners Group is restricting investor withdrawals from its $8.6 billion Global Value SICAV fund after redemption requests exceeded 5% of the net asset value, a move that rattled sentiment across private markets.
Apollo President Jim Zelter told attendees at Bernstein’s Strategic Decisions Conference in New York last month that he expects wealthy clients to continue to seek cash back from private credit products after months of net outflows.
“I don’t think it was a one-shot,” he said of the redemption wave.
Zelter warned that redemption pressure could tick higher if some investors try to time the limits. There "may be even a little bit of an increase if people want to game the system," he said, adding, "We are not through the turbulence yet."
He added that investor behavior varies by geography and distribution method, with some regions holding up better than others. "We’re learning … who are our longer-term friends and who are the shorter-term tourists," Zelter said.
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